Labor gives Telstra better NBN deal

The Gillard government has scaled back controversial laws that would have curbed
Telstra
’s growth, in a broadband policy shift that improves the chances of a formal alliance with the company to build the government’s $43 billion network.

The Communications Minister,
Stephen Conroy,
has sacrificed some of his power to block Telstra from buying badly needed wireless spectrum, drawing support from the company as its shares slumped yesterday to a record low on doubts over its future.

The ­proposed legislation sparked a new political brawl as the opposi­tion’s communications spokesman,
­Malcolm Turnbull,
backed the concept of splitting Telstra’s business in two despite strong resistance to the idea among his Liberal colleagues.

Mr Turnbull strongly criticised the new government bill, however, as he negotiated with independents and ­others to force an independent study of the national broadband network’s costs and benefits.

The government promised “dramatically lower" phone bills and an economic boon from the NBN as it demanded that the coalition help pass the bill as soon as possible to clear the way for a crucial vote by ­Telstra shareholders next year.

While the modified reforms extend the competition regulator’s power, they also give Telstra greater certainty that it would be able to bid for wireless spectrum it needs to connect the next generation of mobile phones and other devices.

Telstra will be paid to transfer its retail customers to the NBN and receive long-term fees for access to its infrastructure, which will speed up the laying of fibre-optic cable.

The reform unveiled last year would have given the minister unfettered authority to ban the company from the spectrum auctions but the reform introduced into Parliament yesterday makes that decision subject to a vote on the floor of the ­Parliament. The explanatory memorandum for the modified bill notes that circumstances have changed as a result of the $11 billion heads of agreement signed in June by Telstra and the agency building the network, NBN Co.

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“In light of Telstra’s clear commitment to structural separation as evidenced by its decision to enter into a financial heads of agreement, ­Telstra would only be prevented from acquiring specified bands of spectrum if the minister imposes such a restriction in a legislative ­instrument."

That limits the minister’s authority because legislative instruments can be disallowed by a majority vote in either chamber of Parliament, giving the Opposition and independent MPs a chance to overturn a ministerial decision. Another change to the bill gives Telstra more time to negotiate a final agreement with the government, modifying an original plan to set a 90-day deadline as soon as the bill is passed.

The revised bill gives Senator Conroy the right to defer the deadline while talks continue with the company over a structural separation in which it transfers its copper phone line customers to the NBN Co.

A third significant change adds a new section to the bill to ensure that any agreement between Telstra and the NBN Co would be immune from legal challenge under competition laws, even if the deal created a monopoly provider.

NBN Co could emerge as the only provider of wholesale broadband services after absorbing Telstra’s wholesale operations but the agreement, if approved by the Australian Competition and Consumer Commission, would be deemed to be authorised under trade practices law.

The provisions in Section 577BA of the new bill would prevent any challenge to the broadband deal under the Competition and Consumer Act, the new name for the Trade Practices Act.

Senator Conroy is to hold talks with independent MPs and the Greens to secure support for the bill in the next few weeks, with the hope of getting the reforms through Parliament before the end of the year. But the original bill was stymied last year when Family First senator
Steve Fielding
demanded it be delayed to avoid putting a “gun to the head" of Telstra shareholders. The government was unable to contact Senator Fielding yesterday and he did not return calls.

The passage of the bill would be smoother after July 1 next year, when the balance of power in the upper house would be held by the Greens, who back the broadband network despite opposing the eventual privatisation of the NBN Co.

Telstra chief executive
David Thodey
said the company supported the passage of the bill “on balance" because it offered greater certainty about access to wireless spectrum.

“We believe the interests of Telstra shareholders would be best served by the bill being passed this year so that a definitive agreement on our involvement in the NBN can be reached quickly," he said in a statement. Telstra is urging some modifications to the bill, however, to remove sections that prevent merit reviews of ACCC decisions.

Telstra shares dived to a record low of $2.58 during yesterday’s trading but closed the day at $2.63, down 2¢.

JPMorgan media and telecom analyst Laurent Horrut said the slide was in line with the overall fall in the market but also reflected the uncertainty about the NBN as well as doubts about the company’s future earnings.

“The market hasn’t really got a lot of comfort about the NBN deal," he said, adding that Telstra was constricted in what it could say about the ongoing negotiations.

Senator Conroy said the NBN was already resulting in prices of $30 a month for speeds of 25 megabits per second, an “exceptionally competitive" package for consumers at the trial in Tasmania. NBN Co chief executive
Mike Quigley
acknowledged on Tuesday night, however, that internet providers pay nothing to connect to the wholesale network under an offer that expires on June 30.

Treasurer
Wayne Swan
told Parliament the NBN would lead to “dramatically lower telephone bills and enhanced services" for business such as high-definition video-conferencing.

But he said that a structural or functional separation of the company would be a good thing.

Previously, the Coalition has rejected policies to split Telstra’s business amid concern about shareholders who bought stock in the Howard government’s privatisation of the company.